Credit Rating of Tavan Bogd Finance NBFI LLC

Rationale/ Key rating drivers

Diversified non-banking financial institution: “Tavan Bogd Finance NBFI” LLC, a diversified non-banking financial institution, was established in 2021 and has since commenced full operations. As of the second quarter of 2024, the institution’s total assets have grown to 256.3 billion MNT, placing it third in the industry rankings. Serving over 280,000 customers, the company offers a range of traditional loan products through its 9 branches in Ulaanbaatar and 15 regional branches. In addition, Tavan Bogd Finance provides digital lending services via the PayOn application.

Opportunities for expansion: “Tavan Bogd Finance NBFI” LLC offers a wide range of loan products to its target market, including business loans, collateralized loans, green loans, car loans, digital loans, financial leases, and purchase loans. Currently, the majority of its loan portfolio consists of car loans and digital loans provided through its mobile application. However, there remains significant growth potential, particularly in expanding the business loan and green loan portfolios.

Risk management system: Although “Tavan Bogd Finance NBFI” LLC is relatively new, it has established the necessary rules and regulations for a robust risk management framework. The system is anchored by two key documents: the ‘Risk Acceptance Document,’ approved by the Board of Directors, and the ‘Risk Policy,’ issued by the Chief Executive Officer. The company’s risk management approach follows the ‘three lines of defense’ principle, with each phase of risk identification, measurement, management, and control clearly defined along with the responsible departments and units. Additionally, the company has implemented the ISO 27001:2013 information security standard. On May 3, 2024, an audit conducted by the international firm QFS Management Systems LLP (Canada) confirmed the successful implementation of this management system.

ESG: Since its inception in 2021, “Tavan Bogd Finance NBFI” LLC has experienced rapid growth, capturing 4.45% of the NBFI sector by total assets. The company is a key member of the Sustainable Finance Association of Mongolia and has aligned itself with the United Nations Sustainable Development Council by adopting internal policies that promote environmental, social, and governance (ESG) practices. These efforts are part of its commitment to sustainable development and green economic growth. The organization has integrated the 17 objectives and 8 principles of the Sustainable Financing Program, which guide the setting of its goals, action planning, and implementation. In 2023, the company launched several initiatives within this framework, including the “Green Office,” “Go Green,” “TreeOn,” “Support Green Development,” and a green podcast.

Parent Company Support: “Tavan Bogd Finance NBFI” LLC is backed by its shareholders, “Tavan Bogd Holdings” LLC, “Tavanbogd” LLC, and Ts. Baatarsaikhan. In the past, “Tavan Bogd Holdings” LLC provided a 100% guarantee for the 77.4 billion MNT bond issued by “Tavan Bogd Finance NBFI” LLC and traded on the OTC. Additionally, in 2022, it increased the company’s share capital by 35 billion MNT to support its financial stability. Looking ahead, the parent company has a strong capacity to provide further support to “Tavan Bogd Finance NBFI” LLC ’s operations, if needed.

Rating sensitivities

Positive:

Maintaining sufficient levels of liquid and reserve assets to mitigate potential risks, while expanding operations without compromising the quality of existing assets, will have a favorable impact on the company’s future performance. The credit rating agency believes that if “Tavan Bogd Finance NBFI” LLC undertakes the following actions, it will positively influence its credit rating:

      • Increase profitability,
      • Expand the loan portfolio and operations while preserving asset quality,
      • Boost the volume of liquid assets.

Negative: The following events, whether occurring individually or in combination, could negatively affect the company’s credit rating:

      • Failure to meet or realize business expansion expectations,
      • Reduced liquidity due to funding constraints,
      • An increase in the rate of non-performing loans.

Outlook: Evolving

Evolving outlook is a short-term outlook based on the company’s accelerating growth, quality of company’s loan portfolio, and business model.

Company profile:

“Tavan Bogd Finance NBFI” LLC ( ID: 6710891 , Address: Mongolia, Ulaanbaatar City, Khan-Uul District, District No. 18, Stadium Peak Mahatma Gandhi, ELS Plaza 103, 902, 1001, 1003) was founded in 2021. The non-banking financial institution is engaged in lending activities with a special license from the FRC.

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